Amgen, DaVita shares off on Epogen worries

CHICAGO (Reuters) - DaVita Inc. (DVA.N), the biggest provider of dialysis in the United States, saw its shares fall more than 3 percent on Monday after it warned that safety precautions on popular anemia drugs could crimp earnings.

Shares of Amgen, which makes two of the drugs that will carry new "black box" safety warnings, fell about 2 percent.

The moves follow Friday's U.S. Food and Drug Administration decision to add the most serious type of written warnings to Amgen Inc.'s (AMGN.O) Aranesp and Epogen, and Johnson & Johnson's (JNJ.N) Procrit, advising doctors to choose the lowest dose of the anemia drugs to avoid blood transfusions.

The changes stem in part from several studies suggesting increased risk that the drugs, known as erythropoiesis- stimulating agents, can lead to risk of stroke, heart attack, blood clots and even death when given to kidney disease patients in stronger-than-recommended doses.

Other studies suggests the drugs can spur more rapid tumor growth in patients with head and neck cancer, the FDA said.

Epogen is used in DaVita facilities to treat anemia caused by chronic kidney failure. DaVita runs about 1,300 centers that perform dialysis, a procedure to filter waste from the blood of some kidney-disease patients.

If the use of Epogen does drop as a result of the new warning, "the financial risk to DaVita and other dialysis service providers is real," according to Gary Lieberman, an analyst at Stanford Group company.

Epogen makes up about 44 percent of DaVita's earnings before interest, taxes, depreciation and amortization, the analyst said in a research note.

"We expect some physicians to change their prescribing patterns in response to this labeling change, although we have no ability to predict the extent of those changes," the company said in a statement.

"If those changes result in a material decrease in the amount of (Epogen-type drugs) administered, it will have a material adverse effect on the company's revenues, earnings and cash flow."

CANCER

The drugs are a genetically engineered form of a natural protein that boosts the levels of oxygen-carrying hemoglobin in red blood cells.

FDA officials voiced concern on Friday that the drugs were being given widely to relieve symptoms such as fatigue in cancer patients, even though data has not shown those benefits.

The FDA labeling changes were more stringent than anticipated, according to UBS analyst Kenneth Weakley.

The changes stress the drugs "should not be used to improve quality of life, an area (the drugs) are not indicated for but are used for. We believe these changes will significantly reduce utilization," he said.

UBS downgraded Amgen to "Reduce" from "Neutral," but kept Johnson & Johnson a "Neutral."

Aranesp is Amgen's best-selling drug, with sales of about $4.1 billion in 2006. Aranesp and Epogen account for roughly half of Amgen's sales. Last year, sales of Johnson & Johnson's Procrit were $3.18 billion.

DaVita shares fell $1.62, or just over 3 percent, to $51.38 in afternoon trading. Amgen fell $1.16, or about 2 percent, to $59.70 on Nasdaq and Johnson & Johnson shares were off 59 cents or 0.95 percent to $61.55 on the NYSE.